Top 5 Best Ways Nigerian Farmers Can Build Credit Scores for Future Loans in 2025

Before we talk about credit scores for Nigerian farmers, I would like to take us back to how everything started or predates. The basic needs of man is food, clothing and shelter. Because without food it will be difficult for the man to survive, alright, if the man does manage to survive he still needs clothing to cover himself up and lastly that man must sleep in a house to prevent being attacked by wildlife.

It is on these basis that agriculture is given priority in many countries including Nigeria. Because all citizens must first be alive before talking about governance and infrastructure. Food security has become a matter of concern globally, and countries such as Nigeria are looking for ways to tackle this global emergency.

One of the ways that the Nigerian government is tackling food security is by giving farmers soft loans annually through the Bank of Agriculture (BOA). These loans are given at a single digit interest rate and the moratorium is one year. Although not all Nigerian Farmers can be able to access the loans primarily due to the credit scores of some of them and again due to their population.

Many farmers in Nigeria do not know that they can be able to access loan facilities in both commercial banks and micro finance banks. They rely mostly on those government agricultural programs or initiatives that are given mostly through the Bank of Agriculture.

However, farmers in Nigeria just need to be sensitized about credit scores with which if they build it well they will be able to access loans in any of the commercial banks and or the micro finance banks that can give them loans at any given time.

Introduction

The concept of credit scores came into effect to basically help reduce the risks previously faced by financial institutions such as banks to mitigate losing money through loan facilities to people who either repay late or never repay at all.

Now, banks or financial institutions rely on the past loan histories of the borrowers to make a loan decision. Before we proceed, it will be more appropriate to understand what a credit score is all about.

What is a Credit Score?

A credit score can be defined as a three digit number that shows the likelihood of getting a loan or not. It predicts the creditworthiness of a person.

Why financial institutions rely on it for lending decisions

When you want to borrow money from any financial institution these days, after fulfilling all the requirements as regards the documents, the financial institution will still conduct their due diligence which includes the past history of the potential borrower.

The aim is to get some basic information which includes his attitude to loan repayment, the amounts previously borrowed, how long it took him to repay and if he has any current loan.

This actually helps banks determine how much to offer the borrower, and if the person is not worth offering him any loan the decision will also be made accordingly.

Why many farmers struggle to access loans due to poor or no credit records

Poor credit scores can negatively affect farmers from accessing loans from financial institutions, especially in Nigeria. This is because without good credit scores financial institution may not approve any loan applications from farmers.

I had an experience when I took a loan from fairmoney, an online loan platform licensed by the Central Bank of Nigeria (CBN). The loan was two weeks overdue, then I went to buy a phone to be paying on installments (Easybuy) and to my surprise the Easybuy app rejected my application citing the reason that I was still owing fairmoney. Not just that I was owing fairmoney but that the loan was an overdue loan and I didn’t make any attempt to pay back even in part.

This is exactly what affects Nigerian farmers also, they may have collected loans from other places in the past and either forgot to payback or didn’t have the resources to payback. Their names and details may have been submitted to the credit bureau and when checks are carried out it will reveal that they are actually owing other loan providers.

How building a strong credit profile opens access to agricultural loans, grants, and investment partnerships

When a farmer has a good or strong credit scores he or she may have access to both good agricultural loans from major agricultural financing institutions, government grants and even investment opportunities from both foreign and domestic investors.

When a commercial bank gives out loan to anyone on a three months term, they expect to receive the repayment on or before the expiration of the three months. But when things go contrary, they’re not happy because some of the monies they lend out are actually deposits from customers so they may easily label you as a bad debtor if you refuse to pay within the term of the loan.

Now, how do you think those financial institutions will feel if the loan was repaid prior to the expiration of the term? Excited right? Not just would they be excited but also rate you as a good debtor. This rating is done with some three digits number which then is referred to as credit scores. The financial institution will recommend investors to you and also give you higher loan offers.

Keep Accurate and Transparent Financial Records

Many of the Nigerian farmers operate informally, that’s to say they don’t keep any records of transactions including expenses, expenditure, ledgers and receipts. They don’t keep records of how much they spent in the pre-farming phase until the post farming phase. But record keeping helps in the following ways;

• Keeping these records will help them to understand their expenditure and the interest they’ve made.
• Having proper record keeping helps the farmer to also include his debt in the records as what needs to be settled once the time is due.

Most financial institutions want to look at the financial records of the past farming cultivations, how much profit was realized, how much was expended, the tax paid and how much was left after all deductions were made. The lending institution will understand better that the loan amount being applied for would be properly managed and repaid amicably whenever it’s due.

Tools or methods farmers can use in keeping financial records:

Nigerian farmers can utilize the following tools to be able to keep proper records of his farming process and business:

1. Simple farm diaries: the farmer can use a simple farm diary to keep records of his farming activities including financial record keeping. You can buy this in any bookshop.

2. Bookkeeping apps: there are mobile apps both on the Google Play store and the iOS for record keeping which Nigerian farmers can utilize for their financial record keeping.

3. You may choose to use or depend on the records kept by the corporative of which you are also a member.

4. The benefits of these records keeping is that it actually helps the lending institutions such as banks to have trust in you.

Open and Maintain an Active Bank Account

Opening and maintaining a business account dedicated solely for the farm will also help to build strong credit scores. This is because it will help the lending institution to see all in-flow of cash, how often those cash came in and how long the in-flow stays in the account, and how often you withdrawals were made from the account. All these come into play when trying to build a strong credit profile that will attract banks to give you higher loan offers.

Farmers must avoid holding and keeping cash as they could always be tempted to use it on other needs. Apart from using cash on something else do you also believe that arm rubbers can also rub you and collect your cash? Then the bank is the best choice to transact.

The benefits of this is that it gives you (the farmer) a good financial identity and also helps in generating statements with which lending institutions can be able to access your creditworthiness. Do everything possible to avoid unnecessary cash withdrawals from the account.

Join a Cooperative or Agricultural Association

Sometimes what helps in most cases especially for those who are already owing financial institutions is to join a cooperative or other farmers associations such as SEIFAC. Let’s use the SEIFAC as an example, SEIFAC has over 100,000 farmers across the whole of Nigeria.

The bank would not be carrying credit scores check on all individual farmers but SEIFAC as a cooperative. The loan will be disbursed to SEIFAC and SEIFAC will then disburse to their members. So joining a cooperative is of great value to any farmer.

When you join a cooperative and participate in all their group activities including taking and repaying loans as a group help in also building individual credit scores which will help you as a farmer in the future.

Use Digital Credit Platforms and Repay on Time

Another way to build a strong credit profile as a farmer in Nigeria is by taking small loans from online loan apps such as Carbon, Palmpay, Okash and fairmoney and be prompt to pay back.

These fintech apps do not only build your credit profile, they process access to micro loans to farmers. When you pay back on time they will increase the loan offer. The only problem here is that their interest rate on the loans is very outrageous actually.

I will advise you to always take loans only for the purposes of farming and not for other personal activities or needs.

Get Listed with a Recognized Credit Bureau

It will be good if you as a farmer have a good credit identity, so you can be listed on any credit bureau so that you will have a reputable credit profile that any financial institution would want to lend money to you.

What is a credit bureau?

A credit bureau can be defined as a company that collects financial information about individuals and businesses and compiles them to provide credible credit information services.

Credit bureaus have many functions and some of which include collection and storage of credit data, provision of financial education, generation of a credible credit history, provision and calculation of credit scores, debt recovery and risk management.

Credit Score building cannot be achieved within just a day or two, not even a month or two.

Disclaimer: This article is well written but the purpose of education and should never be considered as a financial advise.